Question
You would like to be holding a protective put position on the stock of XYZ Co. to lock in a guaranteed minimum value of 210
You would like to be holding a protective put position on the stock of XYZ Co. to lock in a guaranteed minimum value of 210 at year-end. XYZ currently sells for 210. Over the next year, the stock price will either increase by 10% or decrease by 10%. The T-bill rate is 4%. Unfortunately, no put options are traded on XYZ Co.
a.How much would it cost to purchase ifthe desired put option were traded?(Do not round intermediate calculations. Round your answer to 2 decimal places.)
Cost to purchase$
b.What would be the cost of the protective put portfolio?(Do not round intermediate calculations. Round your answer to 2 decimal places.)
Cost of the protective put portfolio$
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